First Security Bank of Idaho v. Fred Crouse, D/B/A C & L Diesel Service, 374 F.2d 17, 1st Cir. (1967)

7/26/2019 First Security Bank of Idaho v. Fred Crouse, D/B/A C & L Diesel Service, 374 F.2d 17, 1st Cir. (1967)

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374 F.2d 17

FIRST SECURITY BANK OF IDAHO, Appellant,

v.

Fred CROUSE, d/b/a C & L Diesel Service, Appellee.

No. 8724.

United States Court of Appeals Tenth Circuit.

March 7, 1967.

Thomas J. Kerwin, Denver, Colo. (Richard W. Breithaupt and Hodges,Silverstein & Harrington, Denver, Colo., on the brief) for appellant.

George R. Buck, Jr., Cortez, Colo. (Dilts & Buck, Cortez, Colo., on the

brief) for appellee.

Before MURRAH, Chief Judge, and HILL and SETH, Circuit Judges.

HILL, Circuit Judge.

1 Appellant, assignee-holder of the chattel mortgage, sued appellee in the United

States District Court for the District of Colorado to replevy a Mack truck in the

possession of appellee, a garageman. Appellee counterclaimed for his bill for

repair work and storage, contending that Colorado law gives him a garageman's

lien which is superior to appellant's chattel mortgage. The case was tried to the

court which held that plaintiff-appellant was entitled to possession of the truck

but that defendant-appellee was entitled to relief on his counterclaim for therepairs and storage in the total amount of $1,813.40, plus interest.

2 The facts are these: The subject 1960 model Mack truck was purchased in

Boise, Idaho. The buyer executed a conditional sales contract to the seller and

the seller assigned the contract to appellant bank. The contract was recorded

with the proper Idaho authorities and the lien in the amount of $11,475.00 was

noted on the face of the title. The buyer was in the business of hauling livestock

and his employee, on March 26, 1964, drove the truck into Colorado for that purpose. The truck broke down near Cortez, Colorado. The appellee towed it to

his shop and, acting on the driver's instructions, telephoned the buyer in Idaho

to obtain authorization to perform necessary repair work. The buyer, over the



telephone, authorized appellee to install an overhauled transmission and to

make other repairs. Ownership of the truck was not mentioned, nor was the

bank in any way mentioned or notified of the repairs. Appellee expended

$1,506.49 for parts and labor and stored the truck for a period of time making a

total charge of $1,813.40. None of this sum has been paid appellee and he has

retained possession of the truck. The buyer defaulted on the conditional sales

contract and, there being diversity jurisdiction, the bank brought this replevinaction in the United States District Court in Colorado, contending it was

entitled to immediate possession of the truck. Appellee answered and

counterclaimed, contending that it, under Colorado law, had a superior lien on

the truck for the amount of the repairs and storage. The District Court agreed

with appellee and the bank appealed.

3 Colorado statutory law defines a conditional sales contract as a chattel

mortgage1 and the Idaho contract will be so referred to herein.

4 The title to the truck bore a notation adequate to apprise a purchaser, creditor or

mortgagee of the existence of the chattel mortgage and the chattel morgage is

therefore entitled to the same effect as though it were filed in the state of

Colorado in the manner prescribed by Colorado statute.2 The question is what

effect does Colorado law give this chattel mortgagee as against the rights of

appellee garageman.

5 Colorado Revised Statutes 1963, § 13-6-19 provides that filing a chattel

mortgage and noting that fact on the face of the title certificate "shall constitute

notice to the world of each and every right of the person secured by such

mortgage." Appellee concedes that the general rule is that a garageman's lien

for work done on a vehicle will be subordinated to prior recorded mortgages.

However, appellee contends that the District Court correctly determined that

excepted from the general rule is a garageman's equitable lien for necessary

repairs of ordinary wear and tear. The District Court found that Colorado lawrecognizes this exception on the theory that the mortgagee has impliedly

consented to permit necessary repairs for ordinary wear and tear because the

chattel is thereby preserved and his security protected.

6 There are early Colorado cases that contain language that can be said to support

the "ordinary wear and tear" exception. In Hawkes v. First National Bank of

Telluride, 75 Colo. 47, 224 P. 224 (1924), a valid chattel mortgage recited that

the owners might retain and use the truck "provided such use and enjoyment

shall not impair the value thereof." The mortgage on the truck was $460.00.

The truck was brought by the owner to defendant "in a broken and dilapidated

condition" and he did repair work amounting to $300.00. After repairs, the



truck was worth $800.00. The Colorado Supreme Court, looking at the

language in the mortgage referred to above, queried: "Was actual or implied

consent thereby given to create this lien?" And the Court answered: "We think

not. Ordinary wear and tear only could have been contemplated."

7 In Walker et al. v. Mathis et al., 78 Colo. 384, 242 P. 68 (1925), the Court said

in dictum that, "It is of the very essence of the mortgaged contract that nothingshall be done or permitted to be done by the mortgagor to impair the mortgage

security, other than ordinary wear and tear. Hawkes v. Bank, supra."

8 Those two cases are the only Colorado law appellee has shown us which in any

way support the exception urged. Those cases have never been overruled. This

led the District Court to conclude that "The significant conclusion to be drawn

from these Colorado cases is that the Supreme Court has not ruled out the

possibility that extreme circumstances, showing a high degree of necessity for the contracting of necessary repairs by the mortgagor, could produce a result

different from that reached in Hawkes and Walker."3

9 We cannot agree. The "exception," so far as our research has indicated, has not

been mentioned since the 1925 case of Walker v. Mathis, supra. If there ever

was any such exception we think it was eliminated by the enactment of § 13-6-

19 of the Colorado Revised Statutes, mentioned above, which provides that

properly recording, and noting chattel mortgages on the title certificate

provides "notice to the world."4 We note in passing, that even if we could agree

that the exception existed, the trial court never made a specific factual finding

that the appellee repaired only "ordinary wear and tear", nor do we think the

record would support such a finding.

10 The conclusion that a prior recorded chattel mortgage is superior to a

subsequent garageman's lien is also supported by the Colorado legislature's

treatment of the problem in its enactment of the Uniform Commercial Code

which became effective on July 1, 1966, after the instant facts occurred. As

promulgated by the National Conference of Commissioners on Uniform State

Laws, the applicable section provides that a repairman's lien takes "priority

over a perfected security interest unless the lien is statutory and the statute

expressly provides otherwise." The Colorado legislature changed this section so

that the Colorado statute, Colorado Revised Statutes, 1963, § 155-9-310,

expressly provides that the repairman's lien "does not take priority over a

perfected security interest unless a statute expressly provides otherwise." This

maintains the prior law by giving the repairman an inferior priority status.5

We disturb a District Court's inter retation of local state law onl when we are



Notes:

Colorado Revised Statutes 1963, § 13-6-2 (14)

Colorado Revised Statutes 1963, § 13-6-32. See Federico v. Universal C.I.T.

Credit Corporation, 140 Colo. 145, 343 P.2d 830

First Security Bank of Idaho, N.A. v. Crouse, D.C., 252 F.Supp. 230, 233

See Colorado Attorney General's Opinion in No. 2361-52; contra, Storke and

Sears, Colorado Security Law, § 24, p. 88

The "Official Comment", following the Colorado statute, states that the

purpose of the section is to provide repairman's liens a priority over earlier

perfected security interest. This "Official Comment" explains the original

Uniform law and was not changed to conform to Colorado's enactment. See

Vol. 7A, Colorado Revised Statutes, 1963, page iii

See Jamaica Time Petroleum, Inc. v. Federal Insurance Company, 10 Cir., 366F.2d 156; Bushman Construction Company v. Conner, 10 Cir., 351 F.2d 681,

cert. denied, 384 U.S. 906, 86 S.Ct. 1340, 16 L.Ed.2d 358; First National Bank

& Trust Company of Oklahoma City, Okl. v. Foster, 10 Cir., 346 F.2d 49 and

cases there cited

11

convinced that the interpretation is clearly erroneous.6 We do feel that the

District Court was clearly erroneous in finding, under Colorado law, that the

appellee had a lien superior to that of appellant. We think Section 13-6-19 of

the Colorado Revised Statutes commands the opposite.

12 That part of the judgment permitting Crouse to recover upon his counterclaim is

REVERSED and the case is remanded with directions to determine the claim of

the First Security Bank of Idaho against Crouse for damages arising out of the

unlawful detention of the truck and to make a redetermination of the liability

for costs.

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Documents

First Security Bank of Idaho v. Fred Crouse, D/B/A C & L Diesel Service, 374 F.2d 17, 1st Cir. (1967)